America Movil, S.A.B. de C.V.

My name is Mariama, and I will be your conference operator today. At this time, I would like to welcome everyone to the America Mobile second quarter 2020 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Now I will turn the call over to Ms. Daniela Laquana, Head of Investor Relations.

Good morning, everyone. Thank you for joining us today to discuss America Mobile Second Quarter 2020 Financial and Operating Results. We have today on the line Mr. Daniel Cash, CEO, Mr. Carlos Garcia Moreno, CFO, Thank you, Daniela.

Thank you, everyone, for being in the second quarter 2020 Financial and Operating Report. And Carlos Garcia Moreno is going to make a summary of the results. Thank you.

Thank you. Thank you, Daniel. Good morning, everyone. Well, towards the end of the first quarter, the financial markets were in disarray, and employment numbers in the U.S. collapsed, threatening to worsen the economic contraction stemming from lockdown measures and a controlling spread of the COVID-19 virus. In fact, as we said, announced a huge monetary and monetary expansion program. This decisive action gradually stabilized the financial markets, allowing for new issues of security throughout the second quarter, and quelled the demand for U.S. dollars that had resulted in . Since then, substantially all Latin American currencies began to recover, with the notable exception of the which declined an additional 4.3 percent of the dollar. At any rate, the Mexican peso, the Colombian peso, and the Chilean peso all of which have dropped sharply in the first three percent, 7.9, respectively, in the second quarter, in which practically all our region of operation was under lockdown. Final measures adopted throughout our region of operation certainly partly on account of the closure of shops and customer trade centers, and partly because they generally co-tail mobility of population and hence all together we lost slightly more than five million uh five hundred thousand in the post-tech segment with most operations posted based normally sections of colombia and telecom Colombia. Both of which had slightly more than 200,000 clients each. Connections were more important in Mexico, 1.7 million shops. Peru, 1 million. And Ecuador and Guatemala had approximately 450,000. In contrast, on the fifth line segment, we gained 450,000 new broadband clients with every operation posting and increasing clients. except for telecom. There were, however, security services, particularly in Brazil, which accounted for 195,000 people taking these connections out of Porto Saco. 358.5 million access lines, a million wireless subscribers, and 81 million offline IDUs. In case of note, our second quarter revenue total 252 billion pesos off strategy from the year earlier quarter 0.6 and revenue falling 37 percent in mexican peso terms on account for the most part of the duplication for reporting currency versus the dollar and the euro over the year, which was approximately 15%. For platform in the U.S. and Puerto Rico, reductions in the equipment sales as a result of the confinement restrictions and conditions for contact in most operations. At constant exchange rates, including Argentina, given its hyperinflationary accounting methodology, service revenues were up 0.8%. The growth generated on the mobile platform rising 2.3%, and growth coming from 0.7%. The deceleration in service revenue growth, 5% in the first quarter, resulted from the direct flow of the region and its economic fallout. At 2.3%, mobile service burden growth slowed down sharply from 8.4%. In Brazil and Colombia, with increases of 8.8% and 4.8% respectively. On the third-hand platform, the impact of COVID was more limited, with the pace of decline of revenues going from minus 0.7 in the first quarter to minus 1.7% in the second quarter. In Colombia, this line of revenues actually accelerated to 9.9% up from 9.5% before the quarter. The acceleration in mobile service revenue growth was practically identical in pre-pair and in post-pair, with revenues of 7 and improving trend began to be lifted. In pre-pair, revenues were affected by the low-band measures of slides charges, of most shops were all the shops, including our own customer care centers. The impact on revenues affect most and more prevalent, including. In both states, applying switch to lower cost plans in anticipation of the economic difficulties they were to face. In various cases, Full and medium-sized enterprises that have to close under the confinement restrictions sought to discontinue the service or reduce its cost, the ability of data services. We tried to stay close to our clients and help them find class that is suited for them during the economic difficulties that may mean that they will stay current in the payments. In percentage points, the decline in total growth rates was steepest in Ecuador and Panama. Equipment sales plummeted early in the crisis, bottoming in April, as you can see in the chart, but climbing back rapidly during the remainder of the quarter. Fixed broadband services continue to lead the way within the group, with revenues increasing 7.3%, very much in line with the pace seen prior to quarters. With only one exception, all our operations posted 3,000 revenue increases in the quarter. Our less mature pre-plan operations, including those in Ecuador, Peru, Argentina, and Costa Rica, all performed well, with the pace of growth picking up speed. Second quarter EBITDA, totaled at 2.6 billion pesos. It was up 5.9% in Mexican peso terms. With the EBITDA margin climbing 1.7 percentage points to 32.9%. Our constant exchange rates, it increased 3.3%, reflecting the impact of new commercial arrangements by TACTO in the U.S. that brought about reductions in net worth cost to be applied from January 1st. Our operating profit jumped 10.5% to 40.9 billion pesos, and helped bring about a net profit of 20 billion pesos in the second quarter, after allowing for financing costs of 11 billion pesos, which were 6.3% lower than in the year before. Our net profit equivalent to 30 pesos per share and 26 dollars per ADR, was up 40% on the same quarter last year. At the end of June, our net debt totaled 755 billion pesos, up from 677 billion pesos between 2019, which reflects among all things an increase in the values of dollar and euro denominated debts, vis-a-vis in Mexican pesos. It stood at 1.39 times EBITDA under our prior methodology of EBITDA. In cash flow terms, our net debt came down by 8.3 billion pesos in the sixth month to June. In addition to the above, our cash flow allowed us to cover capital expenditures in the amount of 63 billion pesos and to devote 6.2 billion pesos to fund labor related obligations. In Mexico, Service revenues came down 2.1%, mostly on account of mobile service revenues that fell from a 10% growth pace in the first quarter to a minus 2.5% in the second quarter, with peak-line service revenues showing a very large decline quarter-over-quarter. In Brazil, full-stage revenues proved to be very resilient, observing an 11.8% increase on the yearly quarter. Although down from the rhythm of the first quarter, it was nonetheless quite a remarkable pace. This growth and revenues stayed on trend, presenting practically the same rate of growth in the first and second quarters. All the above bring about an outstanding jump in EBITDA, which was up 10.7% year-on-year, with EBITDA margin reaching 40%, which is the highest it has been in Brazil. Finally, a note on Colombia. It was the only operation to grow NetApp from no business line. And in addition, it managed to present increasing revenues on both the mobile and face-to-face platforms at 4.8% and 9.9% respectively. With this, thank you very much for listening to the call, and I will now give the floor back to Daniel Hash. Thank you.

Thank you, Carlos. And we're going to start with the Q&A.

At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Walter Piechik with LightShed. Your line is open.

Thanks. Just a question on the, obviously, the very strong performance of margins. of track flow in the United States. You talked about a repricing going back to January. So I assume that the margin was benefits from some catch up from the first quarter. So when we think about Q3, where you don't have the kind of the benefit of the first quarter, what should the margins look like in that US business? Can you talk a little bit more about kind of which carriers gave you that benefit or is it across the board based on the competition that's in the market?

Well, I think we have a very strong quarter in track fund, not only in the carrier cost. I think we have also a very strong performance in sales, in net ads. I think we have more than 200,000 net ads in the quarter. So I think with all what the U.S. is giving, our prepaid market is growing good. And we have a very good quarter. We have discussions and revisions with our cost carriers, the cost of service. And we have a reduction in the cost of the service. And we have been negotiating that through all this year. at the beginning of this year, and starting from 1st of January. So, we finish in the second quarter, but start in first quarter. So, I think you are going to see also benefits in third and fourth quarter, as you are saying also, no? So, we're working with all of them, reviewing with all of them, and well, that's mainly what I can say, no?

So, Daniel, was the margin helped from some catch-up credits from kind of backdating the pricing from the first quarter, or is that really the new margin that you're going to operate at, this 15%?

No, we're catching what we have in the – let's say we have around $130 million that we put from this. in the second quarter and it's $65 million from first quarter, $65 million from second quarter. So that's more or less, those are the numbers. And I think we're going to have more or less the same in the third and in the fourth quarter.

Great. Thank you.

Thank you very much.

Your next question comes from the line of Rodrigo Villanueva. Your line is open.

Yes, thank you. Hi, good morning. I have three questions, if I may. The first one is if you could please elaborate a little bit more on the potential alternatives to create value from your towers. Would you be considering a spin-off, as you did with tele-sites, or is that transaction? Also, are you considering to do this with the vast majority of the 60,000 towers you currently own? Then I can ask the following questions. Thank you.

On the towers, Rodrigo, the only thing I can say and the only thing that we have today is we own 60,000 towers in Latin America and in Europe. And we are analyzing the different alternatives to give value to the shareholders, as we said, and to reduce our debt. So we don't know if there's gonna be spin-off or we're gonna sell them. We still does not know exactly if there's gonna be in all the countries or only in some of the countries. So we are analyzing, we are today analyzing what is the best thing to do for all these assets and to give value to our shareholders. of these 60,000 powers that we have. It's not because I don't want to say anything else. It's because we still don't have anything. We are really, really analyzing different alternatives on that.

Understood, Daniel. Thank you very much. The second question is related to Huawei. We have seen several countries around the world, including Brazil, considering to stop using Huawei equipment for charging networks. This increased pressure from the U.S. government. Do you think this could be extended to other Latin markets? And could you please share with us any potential strategic alternatives that could reduce the negative implications for AMX from a potential Huawei ban in that time?

Well, we are not hearing anything today, still until today. We are not hearing anything about ban Huawei in the rest of Latin American countries. We have hearing something in Brazil, but nothing formal, okay? So still hearing some news, but nothing formal from the government. So that's the only place where we're hearing something. They are talking about 5G, so still we haven't had and we haven't take a decision in 5G. So all 4G, 3G, there's nothing, that's everything, it's okay. Still, we don't know what to do. There's another vendors there. There's Samsung also, Nokia, Ericsson. So still a lot of competition. So if there's a ban on Huawei, we still have other vendors that we can use. So I think Huawei is an excellent technology, but still we don't know if there's going to be something in the other Latin countries, no? In Austria, we're using Nokia, so I don't think there's a problem there. So in Europe, we are in 5G, the only country where we already, because we're making testings and we're doing something in 5G, but the only decision that we already take is Nokia in Austria. So there's no problem over there.

Understood. Thank you very much. And the final one is regarding operating performance in Colombia. As Carlos mentioned, it was pretty strong, particularly considering the COVID crisis. And I was wondering if this has to do with Telefonica's lack of willingness to invest in that time, especially in Brazil, and if you would expect a competitive environment to change now in Colombia, considering that no other partners acquired the operations of Avantel. Thank you very much.

Well, I think we have been doing big improvements in Colombia through the last two years. Colombia has been improved not only in one segment. We're improving in post-paid. We're improving in prepaid, in corporate customers, in peaks, in broadband, in TV. It's the only improvement. It's the only country where we grow in TV also. So we have been improving a lot through the last year, two years maybe. Two years starting to work very hard. And the last year we have been improving. We changed a lot our organization. We have been investing good over there. So I don't think it's only one thing. I think we're making a lot. You know that we have the option in the beginning of the year. We win some frequencies, and we're going to have a new competitor that is warm. And, well, with new competitors, maybe it's going to change a little bit. It's going to be more competition in the prepaid and postpaid in the mobile side. I'm sure it's going to be more competition, but I think we are prepared. We have a very good brand. We have good distribution. We have very quality capacity, so we are prepared to compete in Colombia, Rodrigo.

Wonderful. Thank you very much, Anil. Thank you, Rodrigo.

Your next question comes from the line of Alejandro Galastra from BBVA. Your line is open.

Hi, good morning, Daniel, Carlos, Daniela. Thank you for your call. My first question is related to the mobile business. You mentioned a deceleration in mobile revenue growth that was similar in both the prepaid and postpaid segments. However, I would have expected them to behave differently with post-pay, most probably being more defensive. So perhaps you could give us a further explanation of why this was the case in your opinion, or maybe provide us with additional breakdown. And the second question is related to the broadband operations, which have proven to be very resilient this quarter. but the performance has been quite different among countries. And perhaps you could explain the differences in the performance of the broadband operations in Mexico and Brazil, for example. Thank you.

Yes, well, I think prepaid and postpaid are different markets, and they are behaving different. If you compare, let's say, Mexico and Brazil, I think Mexico, we have more than 50% of our service revenue in prepaid and 40% on postpaid. So that's why we have been more hit in the revenues because at the beginning, April and May, prepaid people, we have a lot of stores closed. We have in Mexico, well, all around Latin America, people were not out of their houses. So it was different. It's very difficult to sell over there. And in a lot of countries in April, we give some packages to help people with this pandemic. So let's say an example in Mexico, we give a package called Amigo Contigo that we give people. free calls for 15 days for free and there's around 28 million packages that we do in in in in April so well that's what is happening and April May and in June starts to to to grow a little bit to recuperate in the prepaid side different in Brazil in Brazil only 20 25 percent of our revenues are prepaid and the rest are postpaid. Then what is happening in postpaid? Postpaid is different. People is starting to reduce their plans. If they have a 500 peso plan, they want to go to to a 400 peso plan or reduce their gig or they are taking, they're being careful with their money. So we are seeing some reductions on the rent of their plan. And in the other side, what you are gonna see is that you are gonna have a lot of bad debts in the phosphate. So there's gonna be people who are gonna say, without a job, and maybe they are going to cancel and not paying you some of the bills. So that's more or less how we feel it's going to behave prepaid and postpaid all through Latin America. In the broadband, I think all around we're doing good. Telmex do good here, 64,000 in the in the three months. Brazil, 100,000 broadband subscribers. Colombia, we also do very good. All over all, we have been growing our net of broadband, but Oscar, if you can talk a little bit more on the broadband side, please.

You know, given the pandemic and pushing the people to work from home, the requirements of bandwidth in the homes has been increasing very much. So the people in the home is doing, you know, taking classes and working from home and a lot of streaming of video and gaming. So that, I think, that pushed the product. And that's what Daniel mentioned. We are getting these net ads. And not only that, our customers are asking for more bandwidth in all the countries.

Thank you, Oscar. Thank you, Daniel and Oscar.

Thank you. Thank you. Your next question comes from the line of Marcelo Santos from JP Morgan. Your line is open.

Hi, good morning. Thanks for taking my question. I have two. The first, could you please provide some view on how things evolved during the quarter? You mentioned a little bit how in April and May prepaid was lower. Could you expand a bit and talk how prepaid, postpaid evolved and how things ended in June just so that we could get a feeling of how the trends should shape up for the third quarter? This is the first question. The second question would be regarding your appetite for M&A. So whatever you could call or you could provide on that. We have some assets on sale, especially in Brazil. So if you could provide some update on that would be very good. Thank you.

Well, in prepaid and postpaid, I think what you – let's talk especially in prepaid. As I said, people staying home. in April and May. So the reduction in sales of the prepaid cards were higher than what we're seeing in June and July. So as the economies are open and starting to be more open and we have more stores and then the retails are open, we're seeing that prepaid is starting to increase. to grow a little bit from what we have seen in April and May. So that's all over all in Latin America. Still some countries are opening faster than the other ones. Other ones are opening and then returning to close a little bit. still we are a little bit uncertain of when we're going to have all the economy open, totally open as we used to have at the beginning of the year. So it's different. In the post-pay side, as I said, people is reducing their output, trying to take care about their money, their rent. They don't want to pay if they don't use it. They are staying at home, so maybe they use more the Wi-Fi, and that makes them feel that they don't need the X amount of gigs that they have in their plan, so that's why they are reducing a little bit But I think all over all, everything is going to return as what we used to have at the beginning of the year. It's going to take a little bit of time, take time also for the economies to recover, to open, but I think everything is going to return. On M&A, well, if you are talking about oil in Brazil, we are aware and we're interested in the assets. So for us, it will be a good fit. We do Nextel. I think in Nextel we have all the synergies done. I think through the mostly of the synergies done. I think at the end of the year we're going to have almost all of the synergies done except for the towers that we need to reduce some towers that we already have, extra towers that we already have. But all the rest of the synergies we have been doing very good the frequencies that we get are very good, also help us to have more capacity. And if we can do with OI to have more customers and capacity also will be good. So we are interested and we are going to participate in the OI option for the mobile site.

Thank you very much.

Thank you. Thank you.

Your next question comes from the line of Diego Arreguio with Goldman Sachs. Your line is open.

Yes. Thank you for taking my question. I guess the first question is still regarding your performance in Brazil. I mean, I could see the main pillars for such a strong performance in mobile. I mean, if we would compound these growths such as, like, The post-payment needs to increase, prepaid recharge. That's a great downgrade to plan. How do you feel your growth will be compounded?

This is my first question. Thank you. Can you repeat it? Because I don't hear you very well. Can you talk a little bit louder, please?

Yes. Can you hear me well?

Yes, a little bit better, yes.

Okay, yes, so I was just wondering if you can walk us through the new pillars for your performance in the Brazilian market, in particular to mobile business, if you can confound the growth, such as like the post-pandemic, in terms of like the prepaid recharge, upgrades and downgrades to plans, and confound how your year-on-year growth, you know, works in this quarter.

I think in Brazil we're doing great. I think we have a great platform. I cannot only talk about mobile. I think our mobile platform is great. We have been increasing capacity, doing more coverage. Speed is very important in Brazil, and we're moving also and doing a lot of things in the network to give a very good speed 4G, 4.5G. So we're investing and we're doing very good in Brazil. Also, in the PIX platform, we have also a great platform. We have 30 million households passed. a lot of broadband, Pay TV, a great platform of Pay TV. And also we have very good management in place and good strategies for that. So all over all, we are doing good. And in this quarter, we also reduced, and not only in Brazil, in all American mobiles, We have been increasing and reducing, increasing efforts to reduce cost and expenses. So I think that's something that we have been doing very well and help us to gain market share. Let's say in Brazil, in post-paid, in the first quarter, I think the revenues were growing 15% year over year. So it was an excellent first quarter. I think second quarter is still very good, growing. I think it's around 8%. I don't remember exactly, but only in the post-pandemic.

11.8%.

Sorry?

11.8%.

11.8%. So it's still working and doing very good. We're making our bundles with the peaks. broadband and TV. So we have a good platform and we're investing there and we're managing very well our company. Nextel give us also good frequency to give more capacity and speed to the customer. So all over all, I don't think there's only one thing. I think all over all, we're doing very good.

Okay, thank you, Daniel. And I guess my second question is related to your margins. If I can just, you know, follow up on this. When I look to the region, there are like several, let's say, moving parts that lead me to believe that margins have, you know, some room to expand. For instance, you mentioned easing competition in some of the markets, right? Industry consolidation, even like the rising of infrastructure players in Latam. And lastly, but not least, let's say digitalization trends. So I would like to hear from you, how do you see these trends impacting American model, and how much do you expect to benefit in terms of margins going forward? Thank you.

I think Carlos wants to answer, or do you want me to answer?

I can tell you a little bit about the margins.

I think margins grow in terms of percentage all around Latin America because two things. First, we have less... The service revenue was mainly growing and the equipment revenue was reducing a lot. So that's why the... the margins grow, especially let's say in Mexico, the margins grow because equipment revenue were down. The other important thing is that we're, as I said, reducing and making big efforts to reduce costs and expenses, very important. We're moving a lot more to the digitalize all our network, our sales, We're trying to do everything digital, so we're working very hard on IT on that, and it's also going to reduce expenses. And, well, as you said, M&As in Latin America, well, we're seeing a new competitor in Colombia, but then in Brazil as well. maybe if oil is gonna be sold, then there's gonna be less competitors in Brazil. So all over all, it's moving in some directions in one country, in other directions in other country. But all over all, I think our margins can improve. go the way we have been having the margins, growing a little bit and growing our EBITDA also. But I don't know, Carlos, if you want to say something else.

I don't know if there's anything more to add. I think it's important only to note that, as Emil said, they were very significant people for reducing costs. Some of them are permanent. Anything that has to do with digitalization, simplification, all of that is permanent. Obviously, having been under more of a situation like the one that we are facing, it is more urgent to bring about some cost deductions, so we have been very focused on that. Then there's some things that also came down inevitably because of the confinement, marketing expenses and the like, you know, anything that is more commercial related. Those are temporary reductions. They also came down for some time. But we are seeing, you know, if you look at the margins, they increase practically everywhere, and that part we have to do also with the reduction equipment revenues. in particular markets, say, for the U.S. and Puerto Rico.

And one more thing that I want to add is also it's going to depend a lot on the economies, okay? Let's see how the economies all around Latin America are going to behave, no? So let's see how this pandemic is going to result till the end of this year and the next one. So it's important to That's helpful.

Thank you. Thank you.

Your next question comes from the line of Fred Mendes with Prodesco. Your line is open.

Hello. Good morning, everyone, and thanks for the call. I have two questions on pretty much the same line here. I just want to get a better understanding of these strongman ads for Tillmax especially on broadband, 63,000. Just, you know, other companies already reported results, and then the net ads were also quite strong on the second few. So my impression here is that the penetration of this service is increasing. So I just want to confirm with you if this bidding is correct, instead of more like a gaining market share from other Facebooks, the size of the market is increasing. And then also, if you can give us a breakdown of the net edge, if it's more towards FTTH, or if we're still being able to gain clients with copper. This will be my question. Thank you very much.

Oscar, do you want to answer that? Yeah, yeah, yeah. But, yeah, you're totally right. I mean, has been an increase in penetration, and we are getting net gains from fiber, as you know, and as well from copper. I wish coming from fiber and coming from copper. Well, you're totally right. What we've been seeing in the market is that the penetration is increasing.

Perfect. Perfect. Thank you. And if I just, if you allow me just for a follow-up, I do understand that close to 25 to 30% of your network today in Mexico, it is already FCTH. Just wondering if you have, not the guidance, but just an estimate of, you know, if you plan to continue to aggressively grow this network, or if now the main focus would be more toward the leverage in the company instead of deploying CapEx towards STTH. Thank you.

Well, you know, within the situation that we are living, we are focused really on migration of customers and improve the penetration of the network. in the next month. Perfect.

Perfect. Thank you very much, Oscar. Thank you, Daniel. No, thank you. Thank you.

Your next question comes from the line of Maria Azevedo with Santander Bank. Your line is open.

Thank you very much, everyone. My first question is a follow-up on the CAPEX you just commented. What is the CAPEX's strategy for 2020? And specifically in Brazil, do you see room to be a little bit more rational and cut the spending this year to the 20% you mentioned on the first call? And the follow-up question would be on 5G. You launched the first initiatives in Brazil. Do you think the 5G market appeal is going to be on consumer mobility? Is there room to charge a premium for 5G services? Or do you see it as a substitute to fix wireless access? How is going to be the 5G strategy for the company? Thank you very much.

Thank you. On the CapEx, we have been reviewing that. I think we are going to reduce the CapEx from our forecast that we have for this year. Yes, we're going to reduce it. Still, we don't know exactly how much. We're going to reduce that. We're still reviewing and seeing how the traffic is going to behave. And also the sales, because part of our capex is on capex-related products. to the sales of NetApps, new customers. So also we're going to see how much we're not cutting anything there. So we're going to see how much and how that is going to behave. So still we don't know. We are a company that moves fast and we're flexible. So we're going to use and do what is necessary to do. But we think that we can reduce capex from the forecast that we have this year. So that's mainly. In 5G, I think, yes, we're doing something in Brazil. And 5G is going to work. It's a very good question, I hope. we can mark up and sell a little bit more at a higher price, the 5G than 4G and 3G. But it's also going to depend a lot on competition and customers. And also 5G is going to work for the wireless assets. So that's what the intention is, and we're going to do that all around Latin America. So that's what we got.

Thank you very much. Just as a quick follow-up, in terms of federal allocation priorities, would you also consider a potential network spin-off? And how do you see those network sharing deals happening in last term? Thank you.

No, we're not considering a network spin-off at this moment. We haven't considered anything there. And, well, I think in some places it makes sense to have a shared network. In other ones, it doesn't make sense. Maybe in the rural areas where there's going to be a small traffic, it makes a little bit of sense to make shared networks in rural. in other places where the growth is and then you have to add and add capacity doesn't make sense for us, but we are not considering to spin off any part of our network.

Thank you so much. Thank you.

Thank you.

Your next question comes from the line of Carlos Laguerrata with GBM. Your line is open.

Hi, Cindy. Good morning. Sorry, to go back to the U.S., please. I just want to understand, this new agreement, was it perhaps a result of, perhaps a consequence of the M&A between T-Mobile and Sprint, or what was the origin of this?

Thank you. I don't think it's related to something special. I think this reduction in cost is related to the market in the U.S., and that is Our carriers want us to be more aggressive sometimes in the market to have better plans and to react faster to that. So that's mainly what we have. Maybe, I don't know if T-Mobile and Sprint merger will help us to do this. I don't know, but it wasn't related to that, okay? We have been discussing this, and we discuss this every year. So every year we have been discussing new plans, new rates, and that's something that happens this time, okay?

Okay, thank you. That's very clear. And if I make a follow-up, And perhaps for Oscar, just the broadband additions of 64,000 don't seem to be a great number, given that the past quarter you guys had more than 100,000, and Telerisa reported over 250,000 quarterly additions. Do you think maybe there's a difference in the trend policy that could explain such large difference between the numbers between you guys and the competition?

Yes, we changed a little bit the policy of on collection in order to liberate network. So you are right.

Okay, that makes sense. Thank you. No, thank you.

Thank you.

Thank you. Thank you.

Your next question comes from the line of Ernesto Gonzalez with Morgan Stanley. Your line is open.

Hi, thank you so much for the call. Just one follow-up on the margin expansion. I don't know if you could give us more color on what is the percentage that comes from lower equipment sales, how much comes from cost savings, and on cost savings. How much should we expect to be structural and how much from temporary items?

Thank you. I don't have it here. I think what we have been having is good negotiations on CAPEX. We have been having also reduction on cost of, let's say, sales, reduction of cost of marketing, reduction of cost of all over all the cost and expenses related to the operations. We have increased our cost in the bad debt. So we have been having more on collectibles than what we used to have. So what I don't have country by country, but as I said, we have a very good effort on reducing costs. So I don't know if that's clear, but I don't have it specifically for country and how much per segment. I don't have it here.

Thank you. Thank you.

Thank you.

Your next question comes from the line of Valentin Mendoza with Benort. Your line is open.

Hi, good morning, gentlemen. Thank you very much for taking my questions and congratulations on the results. I have a couple of them regarding your message and operations. The first one has to do with you could give us an update on the launching of the 5G. We've seen some headlines that you're ready to launch it in Brazil, but I just wanted to know what are the plans up to date for Mexico? And then if I may.

I think in Mexico 5G is going to be delayed. I think we're going to have some testings, maybe testings at the end of the year, but we're not going to have 5G this year. I think we're going to have 5G until next year. All our network is working excellent and giving every, with all this lockdown, and using also a lot of people using broadband, wireless broadband in their home is working excellent. So I think 5G is going to be moving to next year. We're going to have some testings at the end of this year, but we're going to move 5G to the next year in Mexico.

Thank you very much. My follow-up question has to do with your thoughts, if you could share with us your thoughts regarding the interest of two MDMOs in Mexico, with a very aggressive commercial strategy. You just mentioned also that you're seeing some customers switching to lower-cost plans, and I was wondering, you're planning to address this with probably some plans, all inclusive, like they just launched, or what's your thoughts on this slide?

Well, I think you have two MDNOs. Well, it's more competition in the market, but we have two MDNOs that you know, but we have been having six MDNOs for the last two years. So there's another two that are coming in this quarter, but we already have like six or seven MDNOs there. It's more competition, of course, but I think we have the best network. If they're entering with Altan, I think still Altan doesn't have the coverage that you need for a mobile service. Maybe they have a good service in their home, but when you go out and move, then I don't think that's the best service. We have also very competitive plans. We have a 199 pesos plan. unlimited voice, unlimited data, sorry, unlimited voice, unlimited social networks, SMS unlimited, and with some data. So we are also competitive and, of course, more competition. Then we're having more competition, but I think we're prepared to compete. Thank you very much. Thank you. Thank you.

Due to time constraints, this was the last question. I will now turn the call back over to Mr. Daniel Hash for final remarks.

I'll just thank everyone for being in the call. Thank you.

This concludes today's conference call. You may now disconnect.